“State and local governments are trying unconventional ways to fund their pension liabilities, such as offering lump-sum cash payments to employees.”
For public plans, the first problem you’d have to overcome is taker bias. That is, those most likely to take a buyout would be cancer patients, heart attack survivors, AIDS victims, diabetics, overweight smokers, etc. You can’t, as a practical matter, screen them out, which would doom the idea. Even if you could, if you start with the correct premise that, one way or another, only a portion of scheduled benefits will in fact be paid, the lump sum discount would have to be really huge to make the state better off.